Income Tax Raid, No proceedings can be initiated under Prevention of Corruption Act in absence of Material evidence: Karnataka HC [Read Order]

The Karnataka High Court has held that no proceedings can be initiated under Prevention of Corruption Act ( PC ) in the absence of material evidence. The Court found that there is no material evidence in the source report of the income tax raid.

 This petition is filed by the petitioner/accused No.1 under Articles 226 and 227 of the Constitution of India read with section 482 of Cr.P.C., for quashing the FIR and the charge sheet registered by Anti-corruption Bureau (ACB) and charge-sheeted for the offences punishable under Sections 13(1)(d), 13(1)(e) read with 13(2) of The Prevention of Corruption Act 1988 ("PC Act") pending on the file of XXIII Additional City Civil.

Based on the source report prepared by the then Anti-corruption Bureau ( ACB ) dated 05.12.2016, the ACB registered a case in Crime No.26/2016 and a charge-sheeted against the petitioner and others for the above-said offences.  It was alleged in the source report that, the petitioner joined his service as an Assistant Engineer in the year 1987, then he passed the KPSC examination and became Assistant Executive Engineer, thereafter he was promoted as Executive Engineer.  During the service, he has amassed the wealth in the name of his wife and daughter.  The income tax officials conducted raid on 30.11.2016 in the house of the petitioner/accused and they have issued letter to the Chief Secretary, Government of Karnataka with regard to the seizure during the raid. 

It was alleged that the petitioner had earned Rs.80 lakhs from his salary and Rs.50 lakhs through other sources and total being Rs.1.30 crores and he is also having landed properties in his name and benami names, for worth of rupees Rs.5 crores and 35 lakhs.  His expenditure was Rs.25 lakhs and Rs.1 crore was spent towards medical education of the children, thereby, he has amassed more than Rs.5 crores and Rs.35 lakhs against the known source of income. 

Based upon the source report, the Superintendent of Police, ACB passed an order on 5.12.2016, directing the ACB Police to register FIR and take up the investigation.  Accordingly, the investigation was conducted by one Dy.S.P and filed the charge sheet against the petitioner and four others.  Based upon the charge sheet, the trial court took cognizance of the offences punishable under Sections 13(1)(d), 13(1)(e) read with 13(2) of the PC Act and under Section 109 of IPC, against all the accused persons, which is under challenge by the accused No.1.

 It was contended by challenging charge sheet and taking cognizance of the offence alleging that, there was Income Tax raid by the income tax authorities and they have seized the documents during the raid and subsequently, they took up the matter under investigation.  They have to file the proceedings before the court for any undeclared assets and income of the petitioner, but the investigation by the IT department is still pending. 

The proceedings before the income tax authorities under section 135 of the Income Tax Act, amount to judicial proceedings, until they give findings regarding undeclared assets or income, the ACB police cannot register the FIR.  There are insufficient materials collected by them.  The IT department sent a letter to the Chief Secretary and in turn, the FIR came to be registered. There are no details of the assets and liabilities, known sources of income, or declared income by the petitioner in the letter sent by the income tax authorities.  Such being the case, the Superintendent of Police given permission to register FIR, which is not correct.

As per the source, report shows some Benami assets,  but there are no proper details and names of the Benami details. There is no nexus in the mention of the property.  If any Benami property is there, the same has to be followed under the Benami Act.  He further contended that there is no preliminary enquiry conducted by the ACB,  even the preliminary enquiry started by the IT department was not concluded and the check period as per the FIR was 1987 till 5-12-2016.  However the IT department has not mentioned anything about the same and source report does not reveal, it is based upon the Income tax report. 

Per contra, special counsel for the Lokayuktha has seriously objected the petition and contended that the entire arguments of the learned senior counsel for the petitioner is under surmise.  There are two different agencies which took up the proceedings and investigated the matter and it is separate and parallel proceedings which is permissible under the law. 

The Income tax department is concerned only about verifying whether income is taxable or not, and they cannot initiate the proceedings under the PC Act and punish the public servant.  The preliminary enquiry is not required, the source report also not mandatory and there is no statute to prepare source report.  Since there is no basic foundation in this case to say that the petitioner was having so much assets and liabilities at the time of joining the service, the division bench of  Justice K Natarajan and T N Chikkarayappa quashed the proceedings

To Read the full text of the Order CLICK HERE

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